This Opinion applies to: All Actions
Pending before the Court are several motions. Blue Cross Blue Shield of Massachusetts ("BCBS-MA"), Blue Cross Blue Shield of Minnesota ("BCBS-MN"), Federated Mutual Insurance Company ("Federated"), and Health Care Service Corporation ("HCSC") (collectively "Plaintiffs") move the Court to treble damages [Docket Nos. 887 & 891]; Mylan Laboratories Inc. and Mylan Pharmaceuticals Inc., Cambrex Corporation, and Gyma Laboratories ("Defendants") move for remittitur under Rule 59(e) [Docket No. 890]; and Defendants move the Court to dismiss Blue Cross Blue Shield of Minnesota and Federated Insurance Company [Docket No. 910]. Upon careful review of the motions, oppositions, replies, and the entire record, the Court will DENY Defendants' motion to dismiss [Docket No. 910], GRANT in part and DENY in part Defendants' remittitur motion [Docket No. 890], and GRANT Plaintiffs' trebling motions [Docket Nos. 887 & 891]. I. BACKGROUND*fn1
On June 1, 2005, after a jury trial lasting over three weeks, the jury found for the Plaintiffs and against all Defendants on the following state law claims:*fn2 agreement in unreasonable restraint of trade, conspiracy in unreasonable restraint of trade, monopolization, and attempted monopolization, all in the Lorazepam active pharmaceutical ingredient ("API") market and the Lorazepam tablet market and in the Clorazepate API and tablet markets.*fn3 The jury awarded Plaintiff Blue Cross Blue Shield of Minnesota $1,756,096.00, Plaintiff Blue Cross Blue Shield of Massachusetts $8,430,887.00, Plaintiff Federated Mutual Insurance Company $410,878.00, and Plaintiff Health Care Service Corporation ("HCSC") $1,448,437.00 in damages.
At the center of this litigation are exclusive licensing agreements among Defendants. In November 1997, Mylan and Profarmco, a wholly owned subsidiary of Cambrex, entered two agreements, each entitled "Exclusive Agreement," in which Profarmco agreed to supply its Lorazepam and Clorazepate API to Mylan in exchange for an upfront payment and a share of Mylan's profits from the sale of the two drugs in the form of royalty payments. The Exclusive Agreements had a term of ten years and provided that Profarmco would not supply Lorazepam and Clorazepate API to any other generic manufacturers in the United States, but the agreements did not prohibit such sale to the branded manufacturers or to any manufacturer outside of the United States. The Exclusive Agreements did, however, provide that Profarmco should take all steps reasonably necessary to prevent the Lorazepam and Clorazepate API it sold outside the United States from entering the United States. The Exclusive Agreements were terminated in December 1998 after the Federal Trade Commission ("FTC") announced its investigation of Mylan's actions. The FTC subsequently entered into a $100 million settlement with Mylan.
Plaintiffs BCBS-MA, BCBS-MN, Federated, and HCSC are health insurance companies that are third-party payors for prescription drugs, including Lorazepam and Clorazepate, on behalf of their insureds and self-funded customers, typically employer-sponsored health plans that contract with Plaintiffs to administer claims on their behalf and pursue plan-related costs. Defendant Mylan is a large generic drug manufacturer and distributor that markets at least 91 generic drugs, including Lorazepam and Clorazepate. Defendant Cambrex sells chemicals through its subsidiaries for, among other things, drug manufacture. Defendant Profarmco is a wholly-owned subsidiary of Cambrex that manufactures and sells various APIs. Defendant Gyma sells APIs and other chemicals to the pharmaceutical industry. Gyma acts as a U.S. agent for Profarmco, buying various APIs from Profarmco and selling them to generic manufacturers in the United States. Prior to the agreements at issue, Profarmco and Gyma sold Lorazepam and Clorazepate API to Mylan and its generic competitors.
The Court will dispose of Defendants' motion to dismiss and remittitur motion before turning to Plaintiffs' motions for treble damages.
On August 22, 2006, the Minnesota Court of Appeals affirmed a lower court's judgment on the pleadings that the plaintiff in an antitrust suit lacked standing. Lorix v. Crompton Corp., 720 N.W.2d 15 (Minn. Ct. App. 2006) ("Lorix I"). Relying on Lorix I, Defendants filed a 12(b)(1) Motion to Dismiss on September 19, 2006 [Docket No. 910]. On August 2, 2007, the Minnesota Supreme Court reversed the appellate court. Lorix v. Crompton Corp., 736 N.W.2d 619 (Minn. Aug. 2, 2007) ("Lorix II"). Prior to the Minnesota Supreme Court's decision, Defendants argued Lorix I "clarifie[d]" existing Minnesota case law and compelled the Court to dismiss Plaintiffs BCBS-MN and Federated based on lack of standing. Following Lorix II, Defendants argue the Minnesota Supreme Court's recognition that standing is not limitless supports their motion to dismiss. Because the Plaintiffs were buyers from, and the customers of, Defendants regardless of whether they paid for the drugs through an intermediary, they were participants in the market constrained and, consequently, are well within the outer limits of Minnesota antitrust standing. Accordingly, the Court will deny Defendants' motion to dismiss.
Minnesota law confers antitrust standing to "[a]ny person . . . injured directly or indirectly" by state antitrust violations. Minn. Stat. § 325D.57 (2004). Prior to trial, the Court considered and denied Defendants' argument that BCBS-MN and Federated lacked standing under § 325D.57 and the relevant case law. In re Lorazepam & Clorazepate Antitrust Litig., 295 F. Supp. 2d 30 (D.D.C. 2003). Relying on State by Humphrey v. Philip Morris Inc., 551 N.W.2d 490 (Minn. 1996), this Court concluded: "[i]n sum, the Minnesota Supreme Court has concluded that third party payor health services organizations possess the general right to sue in antitrust under Section 325D.57 of the Minnesota Antitrust Law." Lorazepam, 295 F. Supp. 2d at 35 (citing Humphrey, 551 N.W.2d at 495-96). Indeed, the Minnesota Supreme Court in Humphrey indicated that, even absent statutory authority, BCBS-MN would likely have standing because that court found persuasive Judge Posner's reasoning in Blue Cross & Blue Shield United of Wisconsin v. Marshfield Clinic, 65 F.3d 1406 (7th Cir. 1995) (holding that Blue Cross Wisconsin had standing to sue in antitrust as a direct purchaser, even though each payment was made on behalf of individual patients). Humphrey, 551 N.W.2d at 497 n.1. Finally, this Court adopted the rationale from Desiano v. Warner-Lambert Co., 326 F.3d 339 (2d Cir. 2003), in holding that plaintiffs are buyers from and customers of defendants, despite the fact that plaintiffs did not deal directly with defendants. Lorazepam, 295 F. Supp. 2d at 40.
Notwithstanding the Court's prior decision, Defendants urge this Court to re-examine Plaintiffs' standing with the aid of the Lorix decisions.*fn4 Relying on Lorix I, Defendants argued that despite the broad language of § 325D.57, standing for those injured "indirectly" is limited to only those who were injured indirectly and were participants in the market constrained. Defendants' Reply 3. Because Plaintiffs were not market participants, Defendants continued, they lacked standing. Id. On August 2, 2007, the Minnesota Supreme Court reversed the lower court, specifically declining to impose a market participant requirement. Lorix, 736 N.W.2d at 629 ("The two federal appellate decisions cited by the court of appeals do not compel us to impose a market-participant requirement."). Notwithstanding its holding that indirect purchasers need not be market participants to have standing, the court acknowledged that "there are injuries so remotely related to antitrust violations that courts simply cannot provide relief." Id. at 19. Before declining to define the outer limits of antitrust standing, the court noted that such a definition must be "informed by foreseeability, proximate cause, remoteness, and relation of the injury to the purposes of the antitrust law; otherwise, almost any antitrust violation would provide almost any citizen with a cause of action arising from the resulting ripples of harm throughout the state's economy." Id. Faced with the Minnesota Supreme Court's decision, Defendants pivot slightly from their earlier position and argue instead that they are situated precisely as the court suggested some defendants may be; specifically, their "injury is most likely too remote and speculative to afford standing." Reply at 2 (citing Lorix, 736 N.W.2d at 629).
In 2003, the Court squarely addressed the core of Defendants' instant 12(b)(1) Motion -- that antitrust injury requires the plaintiff to suffer its injury in the market where competition is constrained -- and found Plaintiffs suffered their injury in the requisite market. Lorazepam, 295 F. Supp. 2d at 38-39. The Court noted that, while it is true that "[a]ntitrust injury requires the plaintiff to have suffered its injury in the market where competition is being restrained," it is also true that "the Supreme Court has carved a narrow exception to the market participant requirement for parties whose injuries are 'inextricably intertwined' with the injuries of market participants." Id. (citing Am. Ad. Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1057, 1057 n.5 (9th Cir. 1999)). The Court found BCBS-MN and Federated were so situated. Id.
The facts in the instant case are similar to those in Desiano v. Warner Lambert Co., 326 F.3d 339 (2d Cir. 2003), and the Court explained and expressly adopted the following rationale from Desiano in its 2003 Opinion:
Although this court has not to date held that insurance companies are, in all instances, the "purchasers" of the drugs for which they reimburse pharmacies, we, like several other courts, have indicated that in a variety of contexts they are the buyers. See, e.g., Med. Arts Pharmacy of Stamford, Inc. v. Blue Cross & Blue Shield of Conn., Inc., 675 F.2d 502, 505 (2d Cir. 1982) ("[T]he Pharmacy Agreements . . . are merely arrangements for the purchase of goods and services by Blue Shield.") (quoting Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 214 (1979)); Blue Cross & Blue Shield United of Wis. v. Marshfield Clinic, 65 F.3d 1406, 1414 (7th Cir.1995) (holding that insurance companies had standing, as the "direct purchaser[s]," to maintain an antitrust suit). Moreover, and more directly relevant to this case, perhaps, Plaintiffs point out that this and other courts have long recognized the right of HBPs to recover from drug companies amounts that were overpaid due to illegal or deceptive marketing practices. See, e.g., Hartford Hosp. v. Chas. Pfizer & Co., 52 F.R.D. 131, 133 (S.D.N.Y. 1971) (approving $10 million class action settlement of antitrust claims brought by insurance plans against drug companies).
Id. at 350-51. As the Court noted in 2003, "[a]lthough the physician prescribes, the pharmacist dispenses, and the patient takes the medication, in most cases, it is the insurer such as Plaintiffs who actually pay." Lorazepam, 295 F. Supp. 2d at 40. Accordingly, the Court found Plaintiffs were Defendants' customers "and as such are the entities chiefly harmed by Defendants' alleged anticompetitive conduct." Id.
The Lorix decisions do not affect the appropriateness of the Court's 2003 analysis. Unlike the plaintiff in Lorix who purchased automobile tires from a company that, in turn, dealt directly with and purchased from the companies allegedly engaged in anti-competitive behavior, the Plaintiffs in the instant matter were direct "customers" of Defendants even though they did not pay the Defendants directly. As this Court stated, "what is important is not whether Plaintiffs have entered into a written purchase agreement with Defendants, but whether Plaintiffs were buyers from and 'customers' of Defendants." Id.
In sum, what the Court found in 2003 remains true today-i.e. Plaintiffs were the buyers from and customers of Defendants regardless of whether they paid for the drugs through an intermediary. Because Plaintiffs were buyers from Defendants, they were participants in the relevant market constrained and were not, as Defendants maintain, further removed from the market than Lorix. The injuries were certainly not too remote or speculative to afford standing. As market participants, whatever the outer limits of Minnesota antitrust standing for indirect purchasers may be, Plaintiffs are less tangentially related than Lorix, and Lorix, according to the Minnesota Supreme Court, "falls well within [the outer limits]." Lorix, 736 N.W.2d at 631. Accordingly, the Court will deny Defendants' motion to dismiss.
A. Availability of Remittitur
As a threshold matter, Plaintiffs posit that Defendants' remittitur motion is, in substance, a motion for reconsideration. Opp'n 1-2. Motions for reconsideration may be granted based on an intervening change in controlling law, the availability of new evidence, or the need to correct clear error or prevent manifest injustice. See Anyanwutaku v. Moore, 151 F.3d 1053, 1057-1058 (D.C. Cir. 1998). Because Defendants have not shown clear error, a change in controlling law, or new evidence, Plaintiffs argue the motion must fail.*fn5 Id. at 2. Plaintiffs' effort to characterize Defendants' motion as one for reconsideration fails, however, because the "prior rulings" to which Plaintiffs refer were contained in the Court's summary judgment opinion. That opinion necessarily considered whether Defendants were entitled to judgment as a matter of law. Defendants correctly note that the Court has yet to rule on whether the jury's award is supported by the evidence. Def. Reply 3. Accordingly, the motion is available to Defendants.
Defendants submit certain sums were erroneously included in the award and move the Court to correct it in two respects: "the damages must be limited in duration and Plaintiffs should not be permitted to recover on behalf of their self funded customers." Def. Reply 2. Plaintiffs oppose the motion but concede the award should be reduced by a total of $76,266.00 for Plaintiff BCBS-MA and $1,058.00 for Plaintiff BCBS-MN to reflect the five self-funded plans that elected to be excluded from the litigation. Pl. Opp'n 17-18. With the exception of the self-funded plans that opted out of the litigation, Defendants fail to establish that the damage award included impermissible components as a matter of law. Accordingly, the Court will grant in part and deny in part Defendants' motion for remittitur.
Pursuant to Fed. R. Civ. P. 59(e), "except when 'it is apparent as a matter of law that certain identifiable sums were included in the verdict that should not have been there,' a trial judge should not unconditionally reduce the amount of damages awarded by verdict, for to do so impermissibly encroaches on the litigants' constitutional right to a jury." Carter v. District of Columbia, 795 F.2d 116, 134 (D.C. Cir. 1986) (quoting 11 Charles Alan Wright and A. Miller, Federal Practice and Procedure, § 2815). In Carter, the circuit court reversed the trial court's decision to excise $40,000 from the award as an "identifiable sum." Id. Our circuit concluded that "[u]nless . . . damages include[d] an impermissible component that can be identified and calculated with precision . . . it is not the district court's prerogative to enter a remittitur by fiat." Id. at 135. Rather, if the district court believes a reduction in the award is appropriate, it should "pose to plaintiffs the choice between consent to the reduction and a new trial." Id. For the reasons that follow, the Court concludes that no portion of the award was included in error, save the self-funded plans that opted out of the litigation. Therefore, with the exception of those self- funded plans, the award stands.
C. Duration of Damages Period
With respect to duration, Defendants urge the Court to adopt one of three alternatives: (1) reduce the award to reflect damages through only the "early foreclosure period," which ended in March, 1998, thus limiting damages to a total of $188,162; (2) reduce the award to reflect damages through only the end of 1998, thus limiting damages to a total of roughly $1.6 million; or (3) reduce the award to include damages through only the fourth quarter of 2000 for Lorazepam and the first quarter of 2002 for Clorazepate (i.e., the ...